Tuesday, August 31, 2010

Demographics: A Number of Interesting Observations

I would have thought that population dynamics would be such a slowly evolving field that interesting developments would be few and far between. Apparently that is not the case. There seems to be plenty going on and it will be important to keep paying attention.

This essay is based on an article by Martin Walker entitled The World’s New Numbers in the Spring 2009 issue of The Wilson Quarterly. Every two years the United Nations produces new estimates of population trends for all countries. The author presumably based his article on the 2008 data base. If one is interested, one can find a widget here that will give you population history and projections for any country over any period of time.

Walker’s purpose is to highlight interesting trends and debunk common misperceptions arising from the misuse of demographic projections.
"The human habit is simply to project current trends into the future. Demographic realities are seldom kind to the predictions that result. The decision to have a child depends on innumerable personal considerations and larger, unaccountable societal factors that are in constant flux. Yet even knowing this, demographers themselves are often flummoxed. Projections of birthrates and population totals are often embarrassingly at odds with eventual reality."As examples of the danger in trusting long-term projections, the author provides this quick overview.
"Something dramatic has happened to the world’s birthrates. Defying predictions of demographic decline, northern Europeans have started having more babies. Britain and France are now projecting steady population growth through the middle of the century. In North America, the trends are similar. In 2050, according to United Nations projections, it is possible that nearly as many babies will be born in the United States as in China. Indeed, the population of the world’s current demographic colossus will be shrinking. And China is but one particularly sharp example of a widespread fall in birthrates that is occurring across most of the developing world, including much of Asia, Latin America, and the Middle East. The one glaring exception to this trend is sub-Saharan Africa, which by the end of this century may be home to one-third of the human race."Wilson identifies three "accepted" demographic scenarios that appear to be highly suspect given the current data.
"....three deeply misleading assumptions about demographic trends have become lodged in the public mind. The first is that mass migration into Europe, legal and illegal, combined with an eroding native population base, is transforming the ethnic, cultural, and religious identity of the continent. The second assumption, which is related to the first, is that Europe’s native population is in steady and serious decline from a falling birthrate, and that the aging population will place intolerable demands on governments to maintain public pension and health systems. The third is that population growth in the developing world will continue at a high rate. Allowing for the uncertainty of all population projections, the most recent data indicate that all of these assumptions are highly questionable and that they are not a reliable basis for serious policy decisions."Walker has already mentioned the European resurgence in fertility. He also points out that an immigrant does not necessarily maintain the same birth rate in the new culture.
"One fact that gets lost among distractions.... is that the birthrates of Muslim women in Europe—and around the world—have been falling significantly for some time. Data on birthrates among different religious groups in Europe are scarce, but they point in a clear direction. Between 1990 and 2005, for example, the fertility rate in the Netherlands for Moroccan-born women fell from 4.9 to 2.9, and for Turkish-born women from 3.2 to 1.9. In 1970, Turkish-born women in Germany had on average two children more than German-born women. By 1996, the difference had fallen to one child, and it has now dropped to half that number."

"These sharp reductions in fertility among Muslim immigrants reflect important cultural shifts, which include universal female education, rising living standards, the inculcation of local mores, and widespread availability of contraception. Broadly speaking, birthrates among immigrants tend to rise or fall to the local statistical norm within two generations."
Most of the Muslim countries fall into the "developing" category, at best. Yet earlier population growth projections have proved untrustworthy.
"The decline of Muslim birthrates is a global phenomenon. Most analysts have focused on the remarkably high proportion of people under age 25 in the Arab countries, which has inspired some crude forecasts about what this implies for the future. Yet recent UN data suggest that Arab birthrates are falling fast, and that the number of births among women under the age of 20 is dropping even more sharply. Only two Arab countries still have high fertility rates: Yemen and the Palestinian territories."

"In some Muslim countries—Tunisia, the United Arab Emirates, Bahrain, Kuwait, and Lebanon—fertility rates have already fallen to near-European levels. Algeria and Morocco, each with a fertility rate of 2.4, are both dropping fast toward such levels. Turkey is experiencing a similar trend."

"Revisions made in the 2008 version of the UN’s World Population Prospects Report make it clear that this decline is not simply a Middle Eastern phenomenon. The report suggests that in Indonesia, the country with the world’s largest Muslim population, the fertility rate for the years 2010–15 will drop to 2.02, a shade below replacement level. The same UN assessment sees declines in Bangladesh (to 2.2) and Malaysia (2.35) in the same period. By 2050, even Pakistan is expected to reach a replacement-level fertility rate."
The author mentions two countries, Iran and Russia, where population trends could have serious geopolitical ramifications.
"Iran is experiencing what may be one of the most dramatic demographic shifts in human history. Thirty years ago, after the shah had been driven into exile and the Islamic Republic was being established, the fertility rate was 6.5. By the turn of the century, it had dropped to 2.2. Today, at 1.7, it has collapsed to European levels. The implications are profound for the politics and power games of the Middle East and the Persian Gulf, putting into doubt Iran’s dreams of being the regional superpower and altering the tense dynamics between the Sunni and Shiite wings of Islam. Equally important are the implications for the economic future of Iran, which by midcentury may have consumed all of its oil and will confront the challenge of organizing a society with few people of working age and many pensioners."

"In Russia, the effects of declining fertility are amplified by a phenomenon so extreme that it has given rise to an ominous new term—hypermortality. As a result of the rampant spread of maladies such as HIV/AIDS and alcoholism and the deterioration of the Russian health care system, says a 2008 report by the UN Development Program, "mortality in Russia is 3–5 times higher for men and twice as high for women" than in other countries at a comparable stage of development. The report—which echoes earlier findings by demographers such as the Woodrow Wilson Center’s Murray Feshbach—predicts that within little more than a decade the working-age population will be shrinking by up to one million people annually. Russia is suffering a demographic decline on a scale that is normally associated with the effects of a major war."
Finally, Walker provides an intriguing perspective on the issues associated with the aging populations of the developed countries. The major concern arises from the growing number of pensioners who will have to be supported by a relatively smaller work force. He points out that in many European countries the work force participation rate is quite low. Coupling a slightly higher retirement age with incentives to get more women into the work force will alleviate much of the problem.
"....the work force participation rate in Germany (and much of continental Europe) is relatively low. Not only do Germans retire on the early side, but the generous social welfare system allows others to withdraw from work earlier in life. An increase in employment would boost the revenues flowing into the social security system. For example, only 67 percent of women in Germany were in the work force in 2005, compared with 76 percent in Denmark and 78 percent in Switzerland. (The average rate for the 15 "core" EU states is 64 percent; for the United States, 70 percent.)"

"David Coleman, a demographer at Oxford University, has suggested that the EU’s work force could be increased by nearly a third if both sexes were to match Denmark’s participation rates. The EU itself has set a target participation rate of 70 percent for both sexes. Reaching this goal would significantly alleviate the fiscal challenge of maintaining Europe’s welfare system, which has been aptly described as "more of a labor-market challenge than a demographic crisis."
He also points out that one should consider the fact that a society and its workers must support all the non-workers, a category that also includes children too young to work.
"....the total dependency ratios of the 21st century are going to look remarkably similar to those of the 1960s. In the United States, the most onerous year for dependency was 1965, when there were 95 dependents for every 100 adults between the ages of 20 and 64. That occurred because "dependents" includes people both younger and older than working age. By 2002, there were only 49 dependents for every 100 working-age Americans. By 2025 there are projected to be 80, still well below the peak of 1965. The difference is that while most dependents in the 1960s were young, with their working and saving and contributing lives ahead of them, most of the dependents of 2009 are older, with more dependency still to come. But the point is clear: There is nothing outlandish about having almost as many dependents as working adults."Walker seems to be implying that as our population ages and a greater fraction of our income must go towards supporting pensioners, there can be a compensating effect from having relatively fewer children to support. Does the raising of a child cost society more than the support of a retiree? My guess is yes. Of course, that does not mean funds needing to be extracted from the workforce will not go up, it just means they will go to a level we have dealt with before. I have not heard the aging issue addressed in this context before. It is certainly something to think about.

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